The cautious response from Iran's supreme leader, Ayatollah Ali Khamenei, to Barack Obama's new year greeting can be interpreted as an effort to contain the debate on US-Iranian engagement at a crucial moment in Iranian politics. Khamenei, after taking a day to contemplate his response, moved to prevent the issue distracting Iran's political leaders. His message to the Iranian political system and America was the same; Iranian domestic and economic politics, including the presidential elections, must now take precedent. For this reason, it is probably unrealistic to expect any major public gestures by Iranian officials until after the June elections.

President Mahmoud Ahmadinejad is particularly preoccupied. His campaign to remain president for another four years is adjusting to the departure of one reformist, Mohammad Khatami, and the entry of another, former prime minister Mir Hossein Mousavi. More pressing is his worsening dispute with the Iranian parliament (Majlis) over the country's budget; increasingly crippled by falling gas prices and rising inflation. The decision by Iranian lawmakers to reject the president's plans to compensate low-income families with direct cash payments further undermines Ahmadinejad's economic credibility. This confrontation is probably more significant for the Iranian election than the Obama message. It may influence whether some "principlists", the pragmatic conservatives of which the speaker of Iran's parliament, Ali Larijani, is a focus, will unite behind Ahmadinejad or encourage Tehran's mayor, Mohammad Bagher Ghalibaf, to run.

Khamenei's pronouncement aimed to retain the integrity of the upcoming presidential elections by limiting political discourse to domestic issues. While his response has placed an effective moratorium on the subject, none of the major candidates have anything to gain from getting involved with the major issues defining US-Iranian relations.

It was thus left to the energy minister, Parviz Fattah, to draw a line in the sand on the nuclear issue, even though Obama had not mentioned it. Fattah told the World Water Forum that Tehran would "finish and operate" the Bushehr nuclear plant by the end of the year: "Iran has chosen a direction for achieving peaceful nuclear energy. We have mainly reached this aim." The message was clear; Iran's right to nuclear energy, which is supported across the entire political spectrum, would not be compromised by any engagement with America.

It remains unclear where Khamenei's statement leaves the next phase of America's engagement strategy, which apparently consists of a letter to the supreme leader. Khamenei may indeed by trying to pre-empt this letter, or at least remind Washington not to bother unless it is accompanied by tangible actions to address Tehran's many grievances. Although the ultimate source of religious authority in Iran, Khamenei remains a politician who has held every major position in Iran's political system. Although he cited America's support for Israel as one of those grievances, he well understands that this will not change. However, he will recognise that there is a real opportunity for the relaxing of economic sanctions.

For the US, making such a public approach to Iran during its electoral process was a risk. Washington probably chose to move early to avoid appearing to be waiting in hope of an Ahmadinejad defeat; in effect covering itself should he win. The Obama administration also recognises that, regardless of who is the next Iranian president, the parameters of US-Iranian engagement will be set by the supreme leader. Obama has put the ball firmly in his court. Khamenei's response of "if you change your attitude, we will change our attitude" aims to boot it at least back to the halfway line.

Despite Obama's charm, Tehran still perceives an administration riddled with apparent contradictions. Not least because this time last year, when candidate Obama first muted his intention to engage with Iran, the woman now charged with directing US foreign policy was threatening to "obliterate" Iran if it attacked Israel.

Tehran is still suspicious and confused, probably in equal measures, by Hillary Clinton. The appointment of her resident Iran expert, Dennis Ross, was greeted with dismay. His impact on Iran policy was immediately perceived when the secretary of state's recent trip to the Middle East appeared another effort to isolate Iran. Clinton then further baffled Tehran by inviting Iran to participate in its Afghan conference.

The Iranians are also unsure as to where the US currently stands on the nuclear issue. On 11 March, the director of national intelligence, Dennis Blair, stated that Iran had not decided to press forward with putting a nuclear weapon on a ballistic missile. Another possible change in atmosphere in Washington was indicated by the cold shoulder Obama administration officials gave Gabi Ashkenazi, the Israeli army chief of staff, who had travelled to the US to warn against Iran's alleged nuclear threat.

Yet Obama has still declared that Iran ultimately harbours ambitions to obtain nuclear weapons; a claim that Tehran vehemently denies. Tehran will also note, with alarm, last month's introduction in the US senate of the Iran Threat Reduction Act of 2009. The bill now has 48 co-sponsors – all Republicans. Iranians have never been great at delineating between executive and legislative influence on US policy.

For these reasons, the Iranians remain unsure of Washington's end goal or options should engagement fail. Perhaps the best indication of Iran's response will come from its reaction not to Obama's greeting but to Clinton's invitation to participate in the late March conference on Afghanistan. Its decision to participate in Geneva, and on what basis, could indicate much more clearly Iran's – and the supreme leader's – intentions.